Japanese investors have ‘high expectations’ for government survey on corporate human rights performance

Results will be used to catalyse discussions on how to encourage companies to conduct due diligence

The Japanese Government’s plan to conduct its first business and human rights survey has been praised by investors and business groups.

Conducted by Japan’s Ministry of Economy Trade & Industry (METI) in cooperation with the Ministry of Foreign Affairs, the survey will be sent to some 2,600 large and mid-sized companies listed on the Tokyo Stock Exchange and a number of firms identified by other agencies. It seeks to identify how companies currently address human rights risks in their supply chains, including indirect suppliers. 

Originally scheduled for August, a METI representative told RI that the current Covid lockdown in Tokyo has pushed the project back, and the questionnaire is still being drafted. The representative added companies will be encouraged to provide answers, but the survey is not mandatory.

Institutional investors in the country are already anticipating that the survey will move the needle on the issue of human rights due diligence. 

“If the government officially conducts such a survey, Japanese companies as a whole will raise their awareness of the internationally-required activities in business and human rights,” said Miyuki Zeniya, Head of Sustainable Finance at The Dai-ichi Life Insurance Company, pointing to current guidelines laid out in the UN’s Guiding Principles of Business and Human Rights. “I have high expectations as a Japanese institutional investor,” Zeniya continued, adding that the move could support “an increase in corporate value”. 

The METI representative added that questions in the survey are mostly derived from a series of the UNGPs, including: businesses making a statement of policy, conducting due diligence,  assessing their impacts, and establishing operational-level grievance mechanisms.

Japan’s recently-revised Corporate Governance Code describes human rights as one of a series of “important management issues that can lead to earning opportunities as well as risk mitigation”. It says that company boards “should further consider addressing these matters positively and proactively in terms of increasing corporate value over the mid- to long-term”.

Seiji Kawazoe, an ESG specialist with the Stewardship Development Department of Sumitomo Mitsui Trust Asset Management, told RI: “The Japanese government is encouraging companies to pay more attention to the human rights of people not only within their own operations, but also in their supply chains. We expect the Japanese government to continue to tackle [human rights] with persistence.”

Toshiyuki Imamura, Head of Responsible Investment at Nomura Asset Management, told RI: “As investors, we view this [inclusion of human rights in government initiatives] as a positive shift, as we will gain access to more information and improve our visibility on issues regarding human rights.”

Asako Nagai, a Tokyo-based Managing Director for non-profit Business for Social Responsibility, told RI the move was an extremely positive sign, saying “it could serve well to promote awareness of business and human rights in Japanese corporate communities”.

‘We expect the Japanese government to continue to tackle [human rights] with persistence’ – Seiji Kawazoe, Sumitomo Mitsui Trust Asset Management

The regulators have been mandated to conduct the survey as part of the Japanese Government’s National Action Plan of Business and Human Rights, launched last October.

“We think more people and businesses have interests – concerns, in some way – about business and human rights issues, at home and abroad,” said the METI spokesperson. “We believe it's a good time for us to conduct the first comprehensive survey.”

Following analysis of the survey’s results, the Ministries will begin discussions into how the government can encourage companies to conduct human rights due diligence. 

Akiko Sato, a Japanese Researcher & Representative for NGO the Business & Human Rights Resources Centre, said the results of the survey “would be the basis for necessary policies including mandatory human rights due diligence”. 

“This result needs to highlight how adverse human rights impacts are addressed so that relevant policies could provide adequate remedy for those affected throughout supply chains,” she told RI.

 But METI’s spokesperson insisted this would not be the next step. 

“Let me be clear, the survey will not be followed by some stringent/mandatory measure by the government. Rather, we would like to find what we should do to furnish an enabling environment for business”, the spokesperson told RI.

Yesterday, RI reported that financial institutions and investment funds had been namechecked for the first time in a proposed UN Binding Treaty on Business and Human Rights. The Covid crisis has also bolstered shareholder engagement on human and workers’ rights, with the Principles for Responsible Investment looking to create a network of institutional investors to put pressure on companies seen to be lagging.